Pharmaceutical Spending Grows; Branded Ads Take Lions Share

Pharmaceutical companies spent $1.58 billion on television advertising from January through November of 1998, up from $815.5 million for the same period in 1997, according to findings recently released by Competitive Media Research, New York.

"At this point, the DTC drug advertising is going up at a rate of $100 million a month," said Lynn Fava, an analyst for CMR. "This has been a constant all through 1998."

CMR ranked the top products based on how much money was spent on media. Among the top 37 drug products, at least 18 were advertised either strictly through DRTV or a mixture of brand advertising and DRTV. Marketing experts said that whether a company chooses DRTV or not depends on the goals of the company.

"The type of advertising relates to the brand's strategic objectives," said Frank Hone, executive vice president of Rubin Ehrenthal & Associates, a New York-based advertising agency. "There are brands that completely rely on brand imaging in their advertising. For example allergy medications, which are over-the-counter and are seasonal, rely primarily on brand advertising."

Of the top three pharmaceutical products prescribed for allergies that are advertised on television, Schering-Plough Corp. spent the most with about $75.8 million on brand advertising for Claritin. Pfizer Inc. spent about $53.7 million on a mixture of DRTV and brand advertising for Zyrtec, which is ranked third overall in spending. Hoescht AG spent about $30.8 million on brand advertising for Allegra, ranked fourth.

Hone said DRTV is a terrific way to identify prospects, but added it is hard to determine what action they take since marketers don't know whether or not they were prescribed a specific medication unless they are told by the prospects themselves.

Other agencies prefer DRTV over brand advertising because of the lesser financial risk involved in the advertising.

"There are a number of advantages to DRTV," said Jim Sandino, managing director for Lowe Direct & Co., another New York ad agency. "It is easier to test your creative and it is more flexible, which allows you to target your audience more easily. It also tells you how willing prospects are to call for additional information."

Both Hone and Sandino agree that DRTV is also an ideal method for pharmaceutical companies to create their own proprietary database.

"This is an important tool as a pre-market measure," Hone said. "This way you can have a target audience prior to a drug being approved."

A drug can be marketed prior to approval as long as it is not branded in the advertisement, according to Hone.

"In my experience direct response is more effective when the drug is not branded," he said.

A database can also be used to encourage prospects to see their doctor for more information about the drug.

"If stronger encouragement is needed for someone to see their doctor, a database is extremely important," Sandino said. "It is also needed if the drug is for something chronic."

The difference in cost between brand advertising and direct response can be very significant. Novartis AG spent about $5.6 million on a DRTV campaign for Lescol, which treats high cholesterol, while Merck & Co. spent about $13.5 million in brand advertising on Zocor, which is also a cholesterol-lowering agent.

"Brand advertising can be anywhere from 25 to 75 percent higher than direct response," said Sandino. "It partly depends on who is doing the media buying. If a company has only part-time buyers with no clout, they may get a higher price than other companies. I have also heard of companies not negotiating for lower prices, which hurts us all."

To some agents, the issue of cost depends on what the company's strategy is. Case studies have shown that DRTV is most effective for chronic illnesses, according to Sandino. DRTV campaigns usually have an offer for a coupon that will be sent to people calling the manufacturer's call center. The strategy is to encourage sufferers of an ailment to ask their doctor to prescribe that drug.

"Each product is different in effect. Even when products are similar, the labeling is different," he said. "What works for Lamisil may be wrong for Claritin, for example."

What type of advertising a company uses depends on what the advertisers hope to accomplish, which explains why media spending for Claritin was approximately $13 million more than spending for Lescol.

"The expense of the campaign is relative to what the strategic objectives are," said Hone. "If the strategic objective requires a large amount of money, then it is not expensive. But if a company spends more on the strategic objective than is necessary, then it is expensive."

While DTC pharmaceutical spending has increased, the largest shares of advertising budgets have gone towards television. CMR's research shows that advertising in this category increased in all mediums, including magazines. However, the research shows that magazines only receive 37.7 percent of the money spent on DTC pharmaceutical advertising, down from the 62.2 percent they received in 1996, prior to the changes in the Food and Drug Administration's Guidelines in August 1997.

"Once it got to the point where it made sense to advertise on TV, then the money started shifting there in large amounts," Fava said. "Magazines are seeing a decline, and they are the only ones that are down. The category as a whole is growing but television is through the roof."